Coca Cola 2010 Annual Report Download - page 16

determined to make the acquisition, we believed that the transaction would, among other things, enhance our ability to
create a more fully integrated and adaptable supply chain in the North American market to allow our combined North
American business to more efficiently and effectively operate our distribution chain in the North American territories
and enhance revenue opportunities; create a unified operating system in North America which will address the unique
needs of the North American market; strategically position us to better market and distribute our products in North
America; improve efficiencies by streamlining operations and reducing or eliminating the costs, expenses, management
time and resources associated with interactions and negotiations between the previously separate organizations; allow us
to optimize and improve the efficiencies of manufacturing and logistics operations in North America through economies
of scale and geography; generate significant operational synergies; facilitate and increase the pace of innovation and
new product introduction in North America; and optimize our operating model and improve the strategic planning
process, increasing management focus and streamlining decision-making. While we believe that the anticipated benefits,
including our estimated operational synergies, are achievable, it is possible that we may not be able to realize some or
even a significant portion of such benefits or operational synergies, or may not be able to achieve them within the
anticipated time frame. If we are unable to successfully integrate our North American businesses with the acquired
CCE North American business and to realize a significant portion of the anticipated benefits or operational synergies,
or if it takes us significantly longer than expected to realize such benefits or operational synergies, our future results of
operations may be adversely affected and we may not be able to meet investors’ expectations or achieve our long-term
growth objectives, which could negatively affect the value of your investment in our Company.
We may incur higher than expected costs in connection with the integration of the acquired CCE North American business,
which could hurt our financial performance in future periods.
We have incurred, and expect to continue to incur, significant costs and expenses in connection with the integration of
the North American businesses we owned prior to the CCE transaction with the acquired CCE North American
business. While we believe that our estimates of integration costs and expenses are reasonable, we cannot assure you
that our actual costs and expenses will not be significantly higher than our current estimates or that we will not incur
significant unanticipated integration costs and expenses in the future. If we underestimated or incur significant
unanticipated integration costs and expenses, our future financial results could suffer.
Our indebtedness following completion of the acquisition of CCE’s North American business is substantially greater than our
historical level of indebtedness, which will increase our borrowing costs and interest expense in future periods and, therefore,
may adversely affect our financial performance.
As a result of the CCE transaction, we assumed approximately $7.9 billion of debt from CCE. As a result of the
substantial increase in our indebtedness, our borrowing costs and interest expense in future periods will be higher than
in the past. The increased indebtedness and higher borrowing costs and interest expense may reduce amounts available
for dividends, stock repurchases, capital expenditures and acquisitions, and may cause rating agencies to downgrade our
debt, all of which could have adverse effects on our future financial performance.
Our pension expense has substantially increased as a result of the acquisition of CCE’s North American business and we may
incur multi-employer plan withdrawal liabilities in the future, which could negatively impact our financial performance.
Our total pension expense for 2010 was $176 million. In 2011, we expect our total pension expense to be approximately
$240 million, with most of the expected increase due to the impact of our acquisition of CCE’s North American
business. In addition, as a result of the acquisition of CCE’s North American business, the Company currently
participates in various multi-employer pension plans in the United States. Our pension expense for U.S. multi-employer
plans totaled $9 million in 2010. The plans we participate in have contractual arrangements that extend into 2015. If, in
the future, we choose to withdraw from these plans, we will likely need to record withdrawal liabilities, some of which
may be material and could negatively impact our financial performance in the applicable periods.
Continuing uncertainty in the credit and equity market conditions may adversely affect our financial performance.
The global credit markets experienced unprecedented disruptions during late 2008 and early 2009. While credit market
conditions have improved somewhat since the crisis, the improvements have not been uniform. The cost and availability
of credit vary by market and are subject to changes in the global or regional economic environment. If the current
uncertain conditions in the credit markets continue or worsen, our ability to access credit markets on favorable terms
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